At a glance International operations



At a glance

International operations

  Year ended 31 March   % change  
  2016   2015   15/16  
Service revenue (Rm) 17 763   15 291   16.2  
Revenue (Rm) 18 356   15 747   16.6  
EBITDA (Rm) 5 385   4 104   31.2  
EBIT (Rm) 2 296   1 756   30.8  
Data revenue (Rm) 4 019   3 046   31.9  
Capital expenditure (Rm) 4 090   4 654   (12.1)  
Active customers 1 (thousand) 27 127   29 533   (8.1)  
Active data customers 2 (thousand) 10 055   9 878   1.8  


Service revenue in our International operations, which account for 26.6% of Group service revenue, increased by 16.2% (9.6%*) with growth in all markets. We are particularly proud of Vodacom Lesotho having now achieved revenue of over R1 billion. The International operations continue to benefit from increased voice revenue of 14.0%, as well as 31.9% growth in data revenue driven by continued network investment. Mobile data revenue now comprises 22.6% (2015:19.9%) of International service revenue.

Active customers decreased 8.1% to 27.1 million, largely due to the customer registration requirements in the DRC and Mozambique. In the DRC, the government ordered all unregistered customers to be disconnected in December 2015. Vodacom has suspended customers with no registration records and communicated to such customers the requirement to register to avoid disconnection. In Mozambique, there has been a phased suspension since November 2015 and a disconnection programme for unregistered customers agreed by the government and operators.

Mobile data revenue grew 31.9% (excluding M-Pesa, 42.2%), supported by an increase of 73.1% in data traffic and 1.8% in active data customers to 10.1 million (also impacted by customer registration requirements), reflecting strong demand for mobile data services in all our markets. We continue to focus on our commercial and network offering to drive data growth, ensuring customers have access to better low cost smart devices, such as Vodacom Kicka and SmartTab, expanding 3G and LTE/4G network coverage and driving the adoption of data bundles.

M-Pesa revenue continues to grow strongly at 19.3%, fuelled by expansion of the distribution channel and a growing ecosystem. We added 1.2 million customers, increasing the number of active customers to 9.2 million, an increase of 15.4% from the prior year. In Tanzania, M-Pawa (savings and loan product) is gaining traction with 1.6 million customers actively using the service.

Enterprise service revenue (including mobile) grew 31.1%. Fixed-line and business managed services grew at 18.5%, and contributed 53.0% to Group fixed-line and business managed services.

EBITDA grew 31.2% (29.9%*) to R5 385 million, contributing 17.7% to Group EBITDA. EBITDA margin increased from 26.1% to 29.3%, with margin improvement across all operations. EBITDA was positively impacted by stronger service revenue, as well as cost efficiency initiatives of R705 million, partly offset by significant currency devaluation in Tanzania and Mozambique.

Capital expenditure of R4 090 million represents 22.3% of revenue. We continue to invest significantly in all our markets to strengthen network and service differentiation. To support the significant data growth and wider voice coverage, we added 54 LTE/4G, 869 3G and 930 2G sites during the year. The Lesotho service licence was renewed for another 20 years, expiring in 2036. In the DRC, we secured a ten year renewal of our existing spectrum until January 2028, as well as the allocation of additional spectrum in the 1 800MHz and 1 900MHz band.

Tanzania

  Year ended 31 March  
  2016   2015  
Active customers 1 (thousand) 12 375   12 172  
Active data customers 2 (thousand) 5 415   5 265  
MOU per month 4 124   149  
Total ARPU 5 (rand per month) 39   42  
Total ARPU 5 (TZS per month) 5 972   6 530  
Number of employees 546   531  
NPS #2 54 ^   54  
Service revenue market share (%) #1 39.3 ^   44.2 ¥  

Our 2016 performance

Despite the challenges associated with the weak economic environment, exchange rate volatility and increased price competition, Vodacom Tanzania increased its customer base to 12.4 million. Our main driver of revenue growth was M-Pesa revenue, which increased 10.5% year-on-year. M-Pesa customers now account for 56.8% of our customer base. M-Pawa, the first savings and loans product based on a mobile platform, is doing very well. Launched in partnership with the Commercial Bank of Africa, M-Pawa has 1.6 million customers. During the year, we launched International Money Transfer services enabling customers to send money to Kenya via M-Pesa. Moving onto the new M-Pesa platform has helped us to improve service levels and increase the number of customers using our financial services offerings.

Mobile data revenue grew strongly, driven by higher smartphone penetration, improved network performance and increases in the take-up of our data-only bundles. We increased our 2G population coverage to 87.3% and 3G to 22.9%, which helped us improve our data speeds and manage the growth in data demand. Ookla tests performed in March 2016, show that our 3G network is delivering twice the average download speed of our competitors. The rising satisfaction with network quality and coverage has been the key driver in closing the NPS gap between our competitors.

While the weakening of the Tanzanian shilling against the US dollar by 23.5% impacted operating and capital expenditures, we improved margins from good execution of our cost savings programme.

 Our commitments

Our focus next year is on growing customer numbers by strengthening our customer segmentation offers and improving our brand perception. We have plans in place to deliver on our customer CARE propositions and accelerate our Enterprise plans. We launched LTE/4G subsequent to year end and will soon go live on the new platform for M-Pesa. This will have a deeper focus on customer value management with new technology and people capabilities being built.

DRC

  Year ended 31 March  
  2016   2015  
Active customers 1 (thousand) 8 527   11 216  
Active data customers 2 (thousand) 1 996   2 338  
MOU per month 4 39   41  
Total ARPU 5 (rand per month) 42   32  
Total ARPU 5 (USD per month) 3.0   2.9  
Number of employees 613   694  
NPS #4 0 ^   27  
Service revenue market share (%) #1 35.0 ^   34.7  

Our 2016 performance

Vodacom DRC delivered a solid performance for the year, with strong service revenue growth and EBITDA margin expansions. All operators are now adhering to the regulated retail price floor set by the regulator for voice. The service revenue growth is underpinned by strong data revenue growth coming from the increased growth in data traffic of 120.0%, driven primarily by the uptake of data bundles and low cost smartphones.

Active customer numbers were negatively impacted as we disconnected customers to comply with the government’s customer registration requirements. To drive new customer acquisition we have deployed a mobile app and increased the points of registration across the country.

Vodacom DRC has the widest coverage in the country, connecting people in some of the most remote and rural areas. We continued to invest aggressively in our network, increasing the number of 2G and 3G base stations. This has resulted in a significantly improved experience for our customers, evidenced by our positive NPS scores in network quality and network coverage. M-Pesa continues to gain momentum, driven mainly by active customer growth of 23.4% as we expanded our distribution channel and grew our ecosystem. We renewed our 2G licence to 1 January 2028 and secured additional spectrum in the current year.

 Our commitments

In the year ahead, we will continue to focus on driving our customer value management programmes, improving our network and delivering low cost smartphones, as well as increasing the broadband Internet rollout for our EBU customers. Cost efficiency initiatives will remain key in delivering improved profitability.

Mozambique

  Year ended 31 March  
  2016   2015  
Active customers 1 (thousand) 4 826   4 877  
Active data customers 2 (thousand) 2 112   1 879  
MOU per month 4 104   113  
Total ARPU 5 (rand per month) 54   52  
Total ARPU 5 (MZN per month) 169   149  
Number of employees 466   417  
NPS #1 59 ^   52  
Service revenue market share (%) #1 43.7 ^   44.0 ¥  

Our 2016 performance

Vodacom Mozambique delivered a strong performance, maintaining market share and NPS leadership. Our service revenue growth is attributable to good performance in both voice and data. Customer growth was negatively impacted by the government’s customer registration requirements.

Data is our key growth area and now contributes 20.7% of service revenue. Active data customers increased 12.4%, while data traffic grew 155.8%, supported by increased sales of Vodacom branded smartphones, the introduction of Vodacom-branded tablets and improved network quality. We increased the number of 3G base stations to maximise on this growing data demand.

Our commercial strategy is showing great results. We achieved customer growth by enhancing our distribution model. Our prepaid loyalty programme is resulting in improved churn as customers are rewarded for staying with Vodacom for longer. We enhanced our data bundles and launched ‘Just 4 You’, giving our customers personalised offers and driving the adoption of bundles. Our M-Pesa customer base grew more than threefold as we expanded the ecosystem by launching more services such as water payments and TV channel payments. We have also driven awareness of M-Pesa products through various marketing initiatives.

Depreciation of the Mozambican metical against the US dollar by 39.5% this year posed a challenge in containing costs. We performed well despite the devaluation and delivered a small improvement in EBITDA margin.

 Our commitments

Our key focus areas are on network expansion, maintaining quality and resilience, optimising the radio network to cope with data usage and increasing the rollout of optical fibre. We will continue to drive customer CARE initiatives to improve customer experience; this will be assisted by the migration to the new M-Pesa platform.

Lesotho

  Year ended 31 March  
  2016   2015  
Active customers 1 (thousand) 1 399   1 268  
Active data customers 2 (thousand) 532   396  
MOU per month 4 75   59  
Total ARPU 5 (rand per month) 62   53  
Number of employees 202   183  
NPS #1 81 ^   74  
Service revenue market share (%) #1 77.4 ^   74.7 ¥  

Our 2016 performance

Vodacom Lesotho has achieved an important milestone this year of more than R1 billion in revenue. ARPU was positively impacted by voice and data revenue growth. We have maintained our market share during this period, and we have a lead in NPS of more than five points ahead of our nearest competitors.

Data revenue was driven by a 34.3% increase in active data customers. More than 75% of data revenue is now in bundle and monthly usage increased by more than 127%. We continue to drive smartphone penetration via our Vodacom Kicka and Smart Tab device sales. We increased the number of LTE/4G, 3G and 2G base stations to cater for the growing demand for data, with 2G and 3G now covering 96.0% and 96.3% of the population respectively. Our service licence was renewed for another 20 years, expiring in 2036.

M-Pesa revenue continues to grow strongly, with M-Pesa customers more than doubling. We launched cross border money transfer from South Africa and improved our ecosystem enabling customers to pay for more services using M-Pesa.

 Our commitments

Our focus areas for the next year are to continue our LTE/4G and fibre rollout, increase M-Pesa activity and continue our customer CARE initiatives to reward customer loyalty.